Automotive News Europe — 2024-09-25
Automotive Industry
VW Group Oliver Blume has warned that costs in Germany are too high as sales wane and Chinese manufacturers push into Europe.
Volkswagen Group and unions start negotiations over wide-ranging cost cuts on Wednesday, 25 September 2024, including possible worker retrenchment, with tensions between both sides higher than they have been in years.
The talks center on VW's plan to potentially shutter factories in Germany for the first time after scrapping decades-old job protections earlier in September 2024. The IG Metall union has vowed to fight those plans, threatening strikes that could paralyze VW for weeks.
"There will be no talks about factory closures and mass layoffs with us," said Thorsten Groeger, the union's lead negotiator. If VW sticks to its cutback plans, then "tens of thousands of colleagues will force the company back on the right track."
The dispute is a major test for VW Group Oliver Blume after union clashes felled a number of his predecessors. Blume has warned that costs in Germany are too high as sales wane and Chinese manufacturers push into Europe.
VW has also lost momentum in China, its biggest single market, where homegrown brands dominate on electric cars.
Blume's main target is VW’s underperforming namesake passenger car brand, whose profit margins are getting squeezed amid a sputtering transition to EVs and a consumer spending slowdown.
Reinforcing that message at the start of the talks in the city of Hanover in VW's home state of Lower Saxony, the VW brand's personnel chief, Arne Meiswinkel, said the brand must cut costs to stay competitive.
"Germany is falling behind the competition. Our core brand Volkswagen is particularly affected by this. International competition is threatening to overtake us," he said. "We must work together to restructure our company. The situation is serious."
The task was to find viable solutions, he added.
VW could force through decisions on plant closures this year, paving the way for more than 15,000 job cuts, analysts at Jefferies said earlier in September 2024. The automaker is eyeing closing two to three facilities, with as many as five German sites under consideration, the analysts said.
Earlier in September 2024, the company got a taste of the anger triggered by its cutback plans, with thousands of workers shouting down managers at the Wolfsburg factory, Europe's largest. Executives lamented flagging sales that have left it with about two plants too many.
Job cuts at VW are harder to push through than elsewhere. Half the seats on its supervisory board are held by labor representatives, and the German state of Lower Saxony — which owns a 20% stake — often sides with trade unions.
The first round of talks will take place in Hanover, with union members expected to protest outside the venue.
The talks come as Germany's industry as a whole is struggling with high costs, labor shortages and rising competition, leading heavyweights including BASF and Thyssenkrupp to consider paring back their activities.
Other German automakers are feeling the pain too, with Mercedes-Benz and BMW cutting their profit forecasts in recent weeks due to weak demand in China.